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Have we made it—or did we lose our minds?
Well, Raleigh—we got what we wanted. Another grand—literally—lesson in being careful what you wish for. So have we made it or lost our minds? The latest and greatest from real estate juggernaut Kane Realty Corporation is towering over Midtown as Raleigh’s tallest residential tower—with soaring rent to boot. Previously dubbed The Walter, The Eastern Residences’ primo penthouse is priced at—wait for it—just under $14K per month (!). As we celebrated our top billing on No. 1 lists across the land for everything from best place to live to top tech to Black and women entrepreneurs to best place to start a biz… we also escalated to, well, top billing. Some of you may think this means we’ve made it. And it may scare the sh*t out of the rest of you. … While all this hoopla is great and we’re no doubt Raleigh proud, with that comes a price tag—especially when it’s time to house or apartment hunt.
It’s all about… Location, Location, Location
Gaining almost $7 trillion in value over the course of 2021, the U.S. housing market is now worth twice as much as it was only a decade ago (aka amid the Great Recession)—obliterating previous single-year records. But one thing that hasn’t changed? It’s still about location, location, location. Reflecting that premise in Raleigh, as people continue to relocate here in droves, in addition to sky-high prices, inventory is also down more than 24% from last year at this time—and risk-aversion is at a seemingly all-time low. Hence, people are not only paying more, but at the cost of security. Beyond throwing down offers exorbitantly above asking price and insanely high due-diligence fees to compete, says DeRonja Real Estate Broker Ann Gray, “buyers are also waiving inspections and appraisals, creating a lot of potential risk. All this translates to potential buyers being priced out of neighborhoods they may have chosen a year ago—or not being able to compete in Raleigh at all.”
So what’s a would-be house hunter to do? We tapped a local buyer who managed to muddle through the mayhem without sacrificing their must-haves for inside tips. Their top advice: “Do not panic buy,” they told us. They also suggested preparing yourself for a two- to six-month hunt, which “will allow you to look at a greater pool of houses. By giving yourself more time, it will give you experience to know what a good house is—and what is overpriced.” While that may be a tough pill to swallow as housing costs continue to trend upward—and as everyone’s situation varies—the longer you extend your hunt, the more likely you are to find the right house. And as our triumphant buyer so aptly reminds us: “Nothing is worse than overpaying on a house you are not happy in.”
House Hunting Struggles
Having never hunted for a house inside Raleigh city limits before, this couple gives us their firsthand experience in their own words:
“We were only on the chase for about a month—not terribly long, all things considered. Our search began on Oct. 25—and we received an acceptance response on Nov. 23. By Dec. 30, we closed on the house. House hunting was like having a second job for a while there. It was very high-paced and dependent on what was available.
Every day was exciting and new—but challenging and painfully unpredictable. We had to be on the lookout for new listings at all times and had to be willing to sacrifice our leisure time to make it to showings before anyone could make an offer.
We made it a point to only look within our desired area. This and the size of the house were our biggest concerns. We would often draw strict lines in the sand not to step out of our location and size requirements; both were nonnegotiable in our minds. For the price, however, we were willing to move, if needed. We knew getting a good house was worth
adjusting our price.
We made a total of three offers and lost out on two of them. For one of the offers, we had high optimism that we would receive an acceptance letter; however, we did not land that house. It was a bit of a shock to us, especially considering how much over the selling amount we bid—which revealed just how tough the competition is.
The circumstance that cost us the bid was not knowing how much more the other buyers were willing to go over—and not knowing how much more we needed to bid over was the hardest part. It was about on par with playing poker. You’re not sure how much the other buyers are willing to go up. While at the same time, you’re trying to not overspend and you only have one chance to one-up the other buyers—but not too much. We played out every scenario in our heads before making an offer.
For the house we ultimately closed on, our size and location preferences were adequately met, but the price was slightly higher than our original expectation (very near our max, but within reason). Our house absolutely satisfied our original wish list. There are a few minor preferences that weren’t met, but they are overshadowed by the major preferences that were fulfilled. We originally didn’t want a house with an HOA, but the one we have meets our needs. Outside of a few odds and ends, we are still very pleased with the house.”
Renting Is Not a Remedy
As the housing market continues to smolder—with no signs of slowing—so too does the rental market, as many city dwellers have been forced to rent or continue renting—creating a “lessor market,” if you will. To exemplify this trend, we spoke to a recent transplant employed by Wells Fargo (ironically in mortgage lending) who was being relocated from Virginia. For six months, he commuted between Norfolk and Raleigh in search of a place to purchase and call home. Alas, after “looking for a house for about six months, I finally gave up and went the rental route,” he says—landing at 616 at The Village in Village District.
While new Raleighites like this one scrounge to lay down roots, other current residents looking to buy are forced to continue to rent as they get repeatedly outbid or lack home purchase options at their price point. And as monthly rates soar for new and renewal leases—jumping as high as 40%—residents are facing the impossible, with many unable to afford the steep increase. (Such jumps are pretty much a unicorn—with even 20% and 30% rental increases being reportedly rare.) So… as Raleigh grapples with going rental rates, we take a look at some of the top rental properties across the city—and the shift in how people are living to get by.
Rooms for Rent?
Out of problems are born cultural shifts, innovation and invention. To wit, as the market balloons, many residents have returned to “room rentals” as an affordable option. And platforms such as Alcove have emerged, specializing in helping find the right room for rent for everyone.
“Over the past decade, there’s been a pretty dramatic change in how we live,” says Alcove CEO Colin Tai, noting a sudden rise in people seeking rooms for rent. “Today, just about 1/3 of American adults live with roommates. North Carolina is no exception, and renting with roommates has become the go-to option for many of us here.” Spurring that charge, he says, beyond rising home prices, are other cultural indicators—delayed marriages, student debt… “these are big societal changes, and we’re seeing that drive incredible demand on our platform.”
For those who live here, says Tai, it’s certainly “no secret the Triangle is in a ‘Goldilocks’ zone.” Translation? Great schools, talent and diversity of industries in spades—all for a fraction of the cost of bigger cities like New York and San Francisco. “Combined with the growth of NC’s tech industry,” he says, “these conditions have created an amazing flywheel of growth.”
But growth comes at a cost—literally. Like house price tags, rents are soaring here, which is a big concern for both tenants and businesses. “I believe it’s going to take us years to solve the shortage issue,” says Tai, “and we desperately need a faster and more sustainable solution.” To put it into perspective, Alcove received 4,000 applications for their homes last year in NC alone—a 4-times increase from the year before that.
“Our plan is to play our part and double down in this region to continue to enable more homes to be accessible to roommate groups,” says Tai.
Grab the popcorn, Raleigh. 2022 looks to be another wild ride. As DeRonja Real Estate owner and principal broker Frank DeRonja explains, right now, as we head toward Q2 2022, “prices continue to rise across the board; inventory of homes remains at record lows; and many new-to-the-market buyers are having to adjust their expectations.” But will the market frenzy start to level at all or just continue to smolder? Industry experts are divided.
For starters, inventory is predicted to improve. Developers and builders have responded to the red-hot market by working to bring more homes online, explains DeRonja—“but this takes time.”
The impact that will have on the buying frenzy, though, remains up for debate. Says Allen Tate Realtors President Gary Scott, “While the market won’t do a complete inverse this year, we’re already seeing signs that the frenzy is starting to cool.” Scott and his team predict the number of offers—which averaged 5.1 in 2021—will normalize toward the end of 2022. With that, they also forecast a return of risk aversion—meaning the trend of buying “as is” or “sight unseen” with nary an inspection or appraisal will begin to dissipate, “signaling the entrance of a more discerning buyer,” says Scott.
But Compass Real Estate broker Cara Pierce has a different outlook. While she notes she’d like to see a cool down in due diligence fees “as many buyers are leveraging their entire down payment in their due diligence fee—and it is a terrible risk to buyers,” she also thinks “it will not be unusual to see 10 to 20 offers on some properties.” So while there’s hope the wild market will start to level out, signs right now give no indication.
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